Saturday, January 22, 2011

New Trade: Short ZB Calls

For anybody following my trades the last month in ZB this trade might seem counterintuitive as yesterday I shorted a call at the lower end of the 119-122 trading range. Here is my thinking: Shorting ZB for the last two months has been easy, nothing this good lasts forever and I've missed the last two entry points when I was out of town and chose to turn the markets off for a few days. The intra-day volatility has been amazing the last few weeks. Just using basic technical analysis and shorting near 122 has worked flawlessly and I've been paid several times Again, nothing is that easy and nothing this good lasts long. I'm concerned that volatility will dissipate, thus you have to wait longer to find entry points. Or worse, this thing breaks to the downside before it goes back up to test 122 and I get caught not having any short exposure. Since I'm willing to short up to 5 contracts at 122, I'm getting some short exposure here now by selling a FEB 122 Call for '520. That's $812 if it ends up expiring worthless. This way if volatility does die down or we break below the trading range, at least I get something before this gravy train ends and I'm forced to find my next meal.

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